Amendment 64 Passed in Colorado: Now What?

Last night, Colorado voters approved Amendment 64, and Washington state voters approved Initiative 502. In enacting these ballot measures, Colorado and Washington become the first states in the country to decriminalize marijuana outside of the medical marijuana context.

What does Amendment 64 mean for Colorado?

Amendment 64 has two basic parts: (1) within certain defined parameters, it decriminalizes adult possession, use and cultivation of marijuana for recreational purposes; and (2) creates a framework for the establishment of a regulated and taxed retail marijuana industry, which would include cultivation, marijuana-infused products manufacturing, and retail sales. Respectively, these can be described as the “decriminalization,” and “regulation” components of Amendment 64.

As an initial matter, it is important to note that Amendment 64 does not affect the federal prohibition on marijuana. Marijuana remains illegal for all purposes at the federal level, and possession of any amount can lead to serious federal civil and criminal penalties. Thus, it will still be a federal crime for adults in Colorado to possess, cultivate, or distribute marijuana. Indeed, Colorado law would be irrelevant, and likely inadmissible, in a federal criminal prosecution or asset forfeiture proceeding arising from federal marijuana charges.

The status of federal marijuana law will have a significant impact on what happens in Colorado, but the effect of the conflict between Colorado and federal law will likely play out differently with respect to different components of Amendment 64. Decriminalization will go into effect as soon as the results of the election are made official (which could take several weeks). At that time, Colorado law enforcement authorities will no longer be able to arrest or prosecute adults possessing small amounts of marijuana, or growing up to six plants for personal use, provided they are otherwise acting in compliance with the requirements of Amendment 64. Accordingly, though it is inaccurate to say that marijuana is “legal” in Colorado in light of continued federal prohibition, as a practical matter, Amendment 64 largely eliminates the risk that any adult acting within the limits of the amendment would be arrested or convicted of marijuana crimes in Colorado. There are simply not enough federal law enforcement authorities on the ground in Colorado to deter adult recreational use of marijuana, and federal authorities cannot force Colorado authorities to enforce federal law. This reduced practical risk of prosecution will certainly have an effect on people’s behavior, and there is likely little that federal authorities will be able to do to meaningfully enforce marijuana prohibition as it relates to adult personal use of the drug.

Regulation, however, is likely a different matter, and its success hinges greatly on the federal attitude and approach toward the creation of the first state-regulated recreational marijuana market in the country. Because of federal forfeiture laws, the implications of regulation will be of particular concern to real estate owners, landlords and real estate lenders who may be faced with the opportunities to provide industrial and retail space to this new industry. In a future post, I will discuss some of the real estate-related issues that will arise from regulation.

The critical period will be the next year or so, while the state enacts regulations, and possibly statutes, to control a newly created recreational marijuana industry. Implementing regulations are supposed to be approved by July of 2013, and it would likely be late 2013 or early 2014 before licenses would be issued to new marijuana businesses. Thereafter, licensed businesses would be able to cultivate marijuana, produce marijuana-infused products, and sell marijuana to persons 21 and over at retail stores. Until then, Colorado adults will have the benefit of decriminalization, and will be able to grow their own without violating Colorado law, but will not be able to purchase marijuana at a retail establishment for recreational use, nor will marijuana be taxed.

Given the uncertain federal reaction to Amendment 64, it remains to be seen whether such a regulated marijuana industry will even get off the ground in Colorado. Whereas federal efforts to mitigate personal marijuana use would likely be futile in light of state-level decriminalization, federal authorities would have very effective tools at their disposal if they were inclined to prevent the establishment of a regulated and taxed recreational marijuana market in Colorado.

As a legal matter, it is well-established that state law changes to marijuana laws have no effect on federal marijuana laws, and nothing prevents federal authorities from prosecuting what might appear to be otherwise law-abiding marijuana businesses. This power is already on display in the context of medical marijuana in Colorado. Colorado’s existing medical marijuana industry currently survives solely due to Department of Justice and the United States Attorney for Colorado’s restrained exercise of prosecutorial discretion. These federal authorities have generally not taken any action against licensed medical marijuana operations that are in compliance with Colorado’s extensive medical marijuana industry regulatory regime. However, earlier this year, the Colorado U.S. Attorney’s Office made a determination that its restraint in exercising its prosecutorial discretion would only go so far. Specifically, Colorado U.S. Attorney John Walsh has determined that his office will not tolerate the continued operation of medical marijuana businesses located near schools. Since the decision, his office has been successful in systematically shutting down such businesses merely by making threats of criminal prosecution and asset forfeiture.

In the circumstances, it is entirely reasonable to question whether federal authorities will allow the development of a regulated market for marijuana outside of the medical context. If national or Colorado-based federal authorities decide to draw a line in the sand on this issue, it could set up a significant conflict. Alternatively, if Colorado’s medical marijuana experience is any guide, federal authorities may decide to simply weigh in at the margins, thereby constraining the retail recreational marijuana industry in Colorado, without entirely foreclosing its development.

Colorado’s governor appears to recognize this distinction between the effect of decriminalization and regulation. Following the announcement of the voters’ approval of Amendment 64, Governor Hickenlooper made a statement strongly affirming Colorado’s intent to push forward with decriminalization, while expressing skepticism about the prospects for regulation:

I think the federal government is probably going to come down just like in prohibition–you can’t do it by state by state–but I think at the very minimum we should work aggressively to decriminalize it; make sure kids don’t get felony records. I mean, the voters–the voters are pretty clear what they feel and what they want, so within the limits of federal law and whatever the federal government will permit, we have to figure out what’s a–how are we going to go forward.

He continued, acknowledging the difficulties involved in regulation of marijuana:

If the federal government says its going to be illegal and they’re going to prosecute, we don’t have much of a voice there. We’re not going–we’re not going to secede from the union. But, we do recognize that the public has spoken loudly and we’re going to communicate that to our friends in Washington.”

It will be very interesting to see how this plays out over the next weeks and months.

In a coming post, I will discuss some of the Amendment 64-related issues that should be relevant to Colorado property owners and landlords.

Bill Kyriagis represents real estate and business clients in litigation, land use and bankruptcy matters. Bill’s litigation practice covers a broad spectrum of commercial litigation, though his clients are primarily concentrated in the real estate, development and finance industries. He frequently represents landlords in breach of lease and commercial eviction cases, and represents lenders in collection actions, including in U.S. Bankruptcy Court in Colorado. Bill represents real estate developers in land use and development disputes, both public and private, and has handled multiple pieces of litigation centering around the Colorado Common Interest Ownership Act (CCIOA). In the land use context, Bill counsels clients on a variety of local government issues, including posturing land use matters for potential litigation and pursuing claims when necessary.

Dan

Fantastically written. Thanks for putting this out there… here’s hoping Washington listens. It seems clear that they could easily cripple, or at least strongly dissuade, the regulation aspect which is, in my opinion, a huge benefit of this passing. We’ll see!!

Will Johnson

As a Landlord I am concerned about tenants growing Marijuana on my properties.
Will I be able to put into my leases that marijuana is not allowed to be grown on the premises or property? Citing Federal law prohibition as the reason.
I don’t want to deal with any problems that would arise from a tenant feeling their right superceded a lease agreement provision.
I am sure I am not alone here.

Though I am not familiar with your particular situation, I can say, as a general matter, that many leases include restrictions on allowable uses of property. Many do not even tie to any legal prohibition, which is why you see use restrictions that may prohibit certain kinds of operations that are otherwise lawful. It is also very common for leases to include express prohibitions on any uses that violate any local, state or federal statute, law, ordinance or regulation. Marijuana-related activities would likely qualify due to the continued federal prohibition. Moreover, the text of Amendment 64 expressly states that it does not prohibit a person or entity “who occupies, owns or controls a property from prohibiting or otherwise regulating the possession, consumption, use, display, transfer, distribution, sale, transportation, or growing of marijuana on or in that property.”

As noted, I do not know the particular circumstances involved in your question, and if you have legal issues, it is always best to retain and consult competent legal counsel directly. In that regard, I would refer you to the disclaimer on this blog, which also applies to the information above. (http://www.rockymountainrealestatelaw.com/disclaimers/disclaimer.html) That said, if you require legal assistance, and would like to discuss whether we may be able to represent and form an attorney/client relationship with you, please feel free to contact me directly.

Thank you for this well written article. I am in property management business. The legalization of the medical marijuana has had a major impact in my industry, particularly from the damages resulted from growing in homes. There is a fine line to walk prohibiting the tenants. It is “medical” and legal here. As a manager, however, I do not wish allowing the use and growth of marijuana in my properties.
I look forward to your future posts on this topic.

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